American Software(AMSWA) - 2023 Q2 - Quarterly Report

General Information Form 10-Q Filing Details This section provides the basic filing information for the Form 10-Q, including the company's name, jurisdiction, address, and stock exchange listing, confirming it is a quarterly report for the period ended October 31, 2022 - The filing is a Quarterly Report on Form 10-Q for the period ended October 31, 2022, for AMERICAN SOFTWARE, INC., a Georgia corporation[2] Trading Information | Title of each class | Trading Symbol | Name of each exchange on which registered | | :------------------ | :------------- | :---------------------------------------- | | Common Stock | AMSWA | NASDAQ Global Select Market | Filer Status and Shares Outstanding The company confirms compliance with SEC filing requirements and identifies itself as a Large Accelerated Filer. It also provides the number of outstanding shares for its Class A and Class B Common Stock as of December 1, 2022 - The registrant has filed all required reports and submitted every Interactive Data File during the preceding 12 months[3] - The registrant is classified as a Large Accelerated Filer and is not a shell company[4] Outstanding Shares as of December 1, 2022 | Classes | Outstanding at December 1, 2022 | | :------------------------------- | :------------------------------ | | Class A Common Stock, $.10 par value | 31,918,863 Shares | | Class B Common Stock, $.10 par value | 1,821,587 Shares | Part I—Financial Information Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, shareholders' equity, and cash flows, along with detailed notes explaining the accounting policies, revenue recognition, acquisitions, and other financial disclosures for the periods ended October 31, 2022 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | ASSETS | October 31, 2022 | April 30, 2022 | | :----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | :--------------- | :------------- | | Cash and cash equivalents | $ 83,962 | $ 110,690 | | Investments | 22,805 | 16,826 | | Trade accounts receivable, less allowance for doubtful accounts of $354 at October 31, 2022 and $423 at April 30, 2022: | | | | Billed | 24,127 | 20,619 | | Unbilled | 2,690 | 2,989 | | Prepaid expenses and other current assets | 5,384 | 5,067 | | Total current assets | 138,968 | 156,191 | | Property and equipment, net | 5,847 | 3,654 | | Capitalized software, net | 867 | 1,586 | | Goodwill | 29,558 | 25,888 | | Other intangibles, net | 2,609 | 147 | | Lease right of use assets | 646 | 935 | | Deferred sales commissions—noncurrent | 1,702 | 2,050 | | Deferred income taxes | 227 | — | | Other assets | 2,588 | 2,384 | | Total assets | $ 183,012 | $ 192,835 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Current liabilities: | | | | Accounts payable | $ 2,485 | $ 2,506 | | Accrued compensation and related costs | 3,723 | 6,918 | | Dividends payable | 3,711 | 3,700 | | Operating lease obligations | 441 | 541 | | Other current liabilities | 2,361 | 1,871 | | Deferred revenue | 36,008 | 41,953 | | Total current liabilities | 48,729 | 57,489 | | Deferred income taxes | — | 1,772 | | Long-term operating lease obligations | 250 | 461 | | Other long-term liabilities | 465 | 137 | | Total liabilities | 49,444 | 59,859 | | Shareholders' equity: | | | | Common stock: Class A, $.10 par value. Authorized 50,000,000 shares: 36,503,495 (31,914,863, net) shares issued and outstanding at October 31, 2022 and 36,405,695 (31,817,063, net) shares issued and outstanding at April 30, 2022 | 3,650 | 3,641 | | Class B, $.10 par value. Authorized 10,000,000 shares: 1,821,587 shares issued and outstanding at October 31, 2022 and April 30, 2022; convertible into Class A Common Shares on a one-for-one basis | 182 | 182 | | Additional paid-in capital | 175,733 | 171,948 | | Retained deficit | (20,438) | (17,236) | | Class A treasury stock, 4,588,632 shares at October 31, 2022 and April 30, 2022, at cost | (25,559) | (25,559) | | Total shareholders' equity | 133,568 | 132,976 | | Commitments and contingencies | | | | Total liabilities and shareholders' equity | $ 183,012 | $ 192,835 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (in thousands, except per share data) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | | :----------------------------------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue: | | | | | | Subscription fees | $ 12,326 | $ 10,361 | $ 24,388 | $ 20,149 | | License | 688 | 805 | 1,008 | 1,297 | | Professional services and other | 9,594 | 10,779 | 19,603 | 20,308 | | Maintenance | 8,830 | 9,266 | 17,735 | 18,728 | | Total revenue | 31,438 | 31,211 | 62,734 | 60,482 | | Cost of revenue: | | | | | | Subscription fees | 4,059 | 3,404 | 7,677 | 6,628 | | License | 94 | 198 | 183 | 357 | | Professional services and other | 6,847 | 7,477 | 14,151 | 14,487 | | Maintenance | 1,577 | 1,746 | 3,150 | 3,720 | | Total cost of revenue | 12,577 | 12,825 | 25,161 | 25,192 | | Gross margin | 18,861 | 18,386 | 37,573 | 35,290 | | Research and development | 4,364 | 4,278 | 8,818 | 8,702 | | Sales and marketing | 5,697 | 5,892 | 11,609 | 12,012 | | General and administrative | 6,001 | 5,476 | 11,766 | 10,010 | | Amortization of acquisition-related intangibles | 32 | 53 | 56 | 106 | | Total operating expenses | 16,094 | 15,699 | 32,249 | 30,830 | | Operating income | 2,767 | 2,687 | 5,324 | 4,460 | | Other income (loss): | | | | |\n| Interest income | 364 | 97 | 573 | 190 |\n| Other, net | (509) | 833 | (599) | 1,177 |\n| Earnings before income taxes | 2,622 | 3,617 | 5,298 | 5,827 |\n| Income tax expense (benefit) | 541 | 303 | 1,084 | (434) |\n| Net earnings | $ 2,081 | $ 3,314 | $ 4,214 | $ 6,261 |\n| Earnings per common share (a) : | | | | |\n| Basic | $ 0.06 | $ 0.10 | $ 0.12 | $ 0.19 |\n| Diluted | $ 0.06 | $ 0.10 | $ 0.12 | $ 0.18 |\n| Cash dividends declared per common share | $ 0.11 | $ 0.11 | $ 0.22 | $ 0.22 |\n| Shares used in the calculation of earnings per common share: | | | | |\n| Basic | 33,720 | 33,337 | 33,688 | 33,195 |\n| Diluted | 34,071 | 34,685 | 34,040 | 34,448 | Condensed Consolidated Statements of Shareholders' Equity Condensed Consolidated Statements of Shareholders' Equity (in thousands, except share data) | For the Three Months Ended October 31, 2022 | Class A Shares | Class A Amount | Class B Shares | Class B Amount | Additional paid-in capital | Retained deficit | Treasury stock | Total shareholders' equity | | :------------------------------------------ | :------------- | :------------- | :------------- | :------------- | :------------------------- | :--------------- | :------------- | :------------------------- | | Balance at July 31, 2022 | 36,448,695 | $ 3,645 | 1,821,587 | $ 182 | $ 173,721 | $ (18,808) | $ (25,559) | $ 133,181 | | Proceeds from stock options exercised* | 54,800 | 5 | — | — | 669 | — | — | 674,000 | | Stock-based compensation | — | — | — | — | 1,343 | — | — | 1,343 | | Net earnings | — | — | — | — | — | 2,081 | — | 2,081 | | Dividends declared | — | — | — | — | — | (3,711) | — | (3,711) | | Balance at October 31, 2022 | 36,503,495 | $ 3,650 | 1,821,587 | $ 182 | $ 175,733 | $ (20,438) | $ (25,559) | $ 133,568 | | For the Six Months Ended October 31, 2022 | Class A Shares | Class A Amount | Class B Shares | Class B Amount | Additional paid-in capital | Retained deficit | Treasury stock | Total shareholders' equity | | :---------------------------------------- | :------------- | :------------- | :------------- | :------------- | :------------------------- | :--------------- | :------------- | :------------------------- | | Balance at April 30, 2022 | 36,405,695 | 3,641 | 1,821,587 | 182 | 171,948 | (17,236) | (25,559) | 132,976 | | Proceeds from stock options exercised* | 97,800 | 9 | — | — | 1,136 | | — | 1,145 | | Stock-based compensation | — | — | — | — | 2,649 | | — | 2,649 | | Net earnings | — | — | — | — | — | 4,214 | — | 4,214 | | Dividends declared* | — | — | — | — | — | (7,416) | — | (7,416) | | Balance at October 31, 2022 | 36,503,495 | 3,650 | 1,821,587 | 182 | 175,733 | (20,438) | (25,559) | 133,568 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | | :------------------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Cash flows from operating activities: | | | | Net earnings | $ 4,214 | $ 6,261 | | Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | Depreciation and amortization | 1,601 | 2,170 | | Stock-based compensation expense | 2,649 | 1,817 | | Net gain on investments | 331 | (1,193) | | Deferred income taxes | (1,999) | (99) | | Changes in operating assets and liabilities: | | | | Purchases of trading securities | (7,094) | (174) | | Proceeds from maturities and sales of trading securities | 784 | 210 | | Accounts receivable, net | (3,209) | 4,502 | | Prepaid expenses and other assets | (173) | (2,013) |\n| Accounts payable and other liabilities | (2,420) | (2,595) |\n| Deferred revenue | (5,945) | (1,174) |\n| Net cash (used in) provided by operating activities | (11,261) | 7,712 |\n| Cash flows from investing activities: | | |\n| Purchases of property and equipment, net of disposals | (2,706) | (615) |\n| Purchases of business | (6,500) | — |\n| Net cash (used in) investing activities | (9,206) | (615) |\n| Cash flows from financing activities: | | |\n| Proceeds from exercise of stock options | 1,145 | 5,714 |\n| Dividends paid | (7,406) | (7,268) |\n| Net cash (used in) financing activities | (6,261) | (1,554) |\n| Net change in cash and cash equivalents | (26,728) | 5,543 |\n| Cash and cash equivalents at beginning of period | 110,690 | 88,658 |\n| Cash and cash equivalents at end of period | $ 83,962 | $ 94,201 |\n| Supplemental disclosure of cash flow information: | | |\n| Cash paid during the period for: | | |\n| Income taxes, net of refunds | $ 2,997 | $ 176 | Notes to Condensed Consolidated Financial Statements – Unaudited A. Presentation and Summary of Significant Accounting Policies This note outlines the basis of presentation for the unaudited interim financial statements, confirming adherence to U.S. GAAP and SEC regulations. It also details the principles of consolidation and the company's ongoing evaluation of recent accounting pronouncements, specifically ASU 2021-08 regarding business combinations - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP for interim financial information and SEC instructions, including all normal recurring adjustments[21] - The company is evaluating the potential effects of ASU 2021-08, 'Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,' which is effective for fiscal years beginning after December 15, 2022[24] B. Revenue Recognition This note details the company's revenue recognition policies under ASC Topic 606, outlining the five-step process for identifying contracts, performance obligations, transaction price, allocation, and attribution. It describes revenue sources (subscriptions, licenses, professional services, maintenance) and how contract balances and remaining performance obligations are managed, including disaggregated revenue by geography - Revenue is recognized when control of promised goods or services is transferred to clients, reflecting the expected consideration, in accordance with ASU No. 2014-09 (Topic 606)[25] - Subscription fees (SaaS) revenue is generally recognized ratably over the term of the arrangement, as clients access and use software hosted by the company or a third party[28] - As of October 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $122.7 million, with about 50% expected to be recognized over the next 12 months[36] Revenue by Geography (in thousands) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | | :------------ | :---------------------------------- | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Domestic | $ 25,570 | $ 26,197 | $ 51,229 | $ 50,624 | | International | 5,868 | 5,014 | 11,505 | 9,858 | | Total | $ 31,438 | $ 31,211 | $ 62,734 | $ 60,482 | C. Declaration of Dividend Payable This note reports the declaration of a quarterly cash dividend of $0.11 per share for both Class A and Class B common stock by the Board of Directors on August 17, 2022, with payment scheduled for December 2, 2022 - On August 17, 2022, the Board of Directors declared a quarterly cash dividend of $0.11 per share for Class A and Class B common stock, payable on December 2, 2022[41] D. Earnings Per Common Share This note details the computation of basic and diluted earnings per common share, utilizing the 'two-class' method for both basic and Class B diluted EPS, and the 'if-converted' method for Class A diluted EPS, in compliance with FASB ASC 260. It also specifies the number of options excluded from diluted EPS calculations due to exercise prices exceeding market prices - The company uses the 'two-class' method for basic EPS and Class B diluted EPS, and the 'if-converted' method for Class A diluted EPS, due to its two classes of common stock with distinct dividend and convertibility rights[42][43][44][45] Basic Earnings Per Common Share (in thousands, except per share amounts) | | Three Months Ended October 31, 2022 | Six Months Ended October 31, 2022 | | :--------------------------------------------------------- | :---------------------------------- | :-------------------------------- | | Distributed earnings (Class A Common Shares) | $ 0.11 | $ 0.22 | | Undistributed losses (Class A Common Shares) | (0.05) | (0.10) | | Total (Class A Common Shares) | $ 0.06 | $ 0.12 | | Distributed earnings (Class B Common Shares) | $ 0.11 | $ 0.22 | | Undistributed losses (Class B Common Shares) | (0.05) | (0.10) | | Total (Class B Common Shares) | $ 0.06 | $ 0.12 | | Basic weighted average common shares outstanding (Class A) | 31,898 | 31,866 | | Basic weighted average common shares outstanding (Class B) | 1,822 | 1,822 | - For the three and six months ended October 31, 2022, options to purchase 3,426,398 and 3,286,253 Class A Common Shares, respectively, were excluded from diluted EPS computation because their exercise prices exceeded the average market price[59] E. Acquisitions This note details the company's accounting for business combinations using the acquisition method and specifically describes the acquisition of Starboard Solutions Corp. on June 28, 2022. The acquisition, valued at approximately $6.5 million in cash plus potential earnout payments, aims to integrate Starboard's supply chain network design software into the Logility Digital Supply Chain Platform - The company acquired certain assets of Starboard Solutions Corp. on June 28, 2022, for approximately $6.5 million in cash, plus up to $6.0 million in contingent earnout payments over a three-year period[61][63] - Starboard's unique supply chain visualization solution, which uses gaming technology for 'what if' analysis and optimizes for unknown locations, will be integrated into the Logility Digital Supply Chain Platform[62] Acquisition-Date Fair Value of Consideration Transferred (in thousands) | Other assets | 340 | | :--------------------- | :-------- | | Goodwill | 3,670 | | Non-compete | 170 | | Current technology | 2,500 | | Customer relationships | 160 | | Total assets acquired | 6,840 | | Long-term liabilities | (340) | | Net assets acquired | $ 6,500 | F. Stock-Based Compensation This note provides details on stock option grants, compensation expenses, and the impact of stock option exercises on income tax benefits. It also reports the total intrinsic value of exercised options and the remaining unrecognized compensation cost - The company granted options for 1,424,000 and 1,308,500 shares of Class A common stock during the six months ended October 31, 2022 and 2021, respectively[67] - Stock option compensation cost was approximately $2.6 million for the six months ended October 31, 2022, with an income tax benefit of approximately $63,000 from option exercises[67] - As of October 31, 2022, unrecognized compensation cost related to unvested stock option awards was approximately $15.7 million, expected to be recognized over a weighted average period of 1.96 years[68] G. Fair Value of Financial Instruments This note describes the company's fair value hierarchy for measuring financial instruments, categorizing inputs into Level 1, 2, and 3. It provides the fair value of cash equivalents and marketable securities as of October 31, 2022, and April 30, 2022, primarily using Level 1 inputs - The company measures investments using a fair value hierarchy: Level 1 (quoted prices in active markets for identical instruments), Level 2 (quoted prices for similar instruments or model-derived valuations with observable inputs), and Level 3 (valuations with unobservable inputs)[70][71] Fair Value of Financial Instruments (in thousands) as of October 31, 2022 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance | | :---------------------- | :----------------------------------------------------------- | :-------------------------------------------- | :---------------------------------------- | :-------- | | Cash equivalents | $ 77,498 | $ — | $ — | $ 77,498 | | Marketable securities | 22,805 | — | — | 22,805 | | Total | $ 100,303 | $ — | $ — | $ 100,303 | H. Stock Repurchases This note details the company's stock repurchase program, including the Board of Directors' authorization to repurchase up to an additional 2.0 million shares of Class A common stock. As of October 31, 2022, the company had repurchased a total of 4,588,632 shares at a cost of approximately $25.6 million under all authorized plans - On August 19, 2002, the Board authorized the repurchase of up to an additional 2.0 million shares of Class A common stock through open market purchases[75] - As of October 31, 2022, a total of 4,588,632 shares of common stock have been repurchased at a cost of approximately $25.6 million under all authorized plans[76] I. Comprehensive Income This note states that Condensed Consolidated Statements of Comprehensive Income are not included in the report because comprehensive income and net earnings would be substantially the same - Condensed Consolidated Statements of Comprehensive Income are not included as comprehensive income and net earnings would be substantially the same[78] J. Industry Segments This note identifies the company's three operating segments: Supply Chain Management (SCM), Information Technology Consulting (IT Consulting), and Other (including American Software ERP and unallocated corporate expenses). It provides a breakdown of revenue, operating income/loss, capital expenditures, and depreciation/amortization for each segment - The company manages its business through three operating segments: Supply Chain Management (SCM), Information Technology Consulting (IT Consulting), and Other (American Software ERP and unallocated corporate expenses)[80][81] Segment Revenue and Operating Income (in thousands) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | | :----------------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue: | | | | | | Supply Chain Management | $ 26,752 | $ 25,380 | $ 52,934 | $ 49,631 | | IT Consulting | 4,159 | 5,226 | 8,674 | 9,702 | | Other | 527 | 605 | 1,126 | 1,149 | | Total Revenue | $ 31,438 | $ 31,211 | $ 62,734 | $ 60,482 | | Operating income/(loss): | | | | | | Supply Chain Management | $ 7,646 | $ 6,718 | $ 14,825 | $ 12,073 | | IT Consulting | 217 | 336 | 432 | 499 | | Other | (5,096) | (4,367) | (9,933) | (8,112) | | Total Operating Income | $ 2,767 | $ 2,687 | $ 5,324 | $ 4,460 | K. Major Clients This note confirms that no single client accounted for a significant portion (more than 10%) of the company's total revenue during the three and six months ended October 31, 2022, and 2021 - No single client accounted for more than 10% of total revenue for the three and six months ended October 31, 2022 and 2021[83] L. Contingencies This note addresses the company's indemnification obligations for intellectual property infringement and software product warranties, noting no historical or expected future costs. It also states that the ultimate disposition of various claims arising in the ordinary course of business is not expected to have a material adverse effect on the company's financial position or results of operations - The company indemnifies clients against intellectual property infringement claims and warrants product operation, but historically has not incurred and does not expect future costs related to these obligations[85][86] - Management believes that the ultimate disposition of various claims arising in the ordinary course of business will not have a material adverse effect on the company's financial position or results of operations[86] M. Subsequent Event This note reports a subsequent event where the Board of Directors declared another quarterly cash dividend of $0.11 per share on November 16, 2022, payable on February 17, 2023 - On November 16, 2022, the Board of Directors declared a quarterly cash dividend of $0.11 per share for Class A and Class B common stock, payable on February 17, 2023[87] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, including forward-looking statements, an economic overview, company business details, and a detailed comparison of financial performance for the three and six months ended October 31, 2022, versus 2021. It also covers liquidity, capital resources, and critical accounting policies FORWARD-LOOKING STATEMENTS - The report contains forward-looking statements regarding future financial performance, business strategy, and other events, identifiable by words like 'anticipate,' 'intend,' 'plan,' and 'expect'[90] - These statements are subject to uncertainties and risks, including economic uncertainty, market conditions, competitive pressures, and acquisition challenges, which could cause actual results to differ materially[91] ECONOMIC OVERVIEW - The global economy faces turbulent challenges including high inflation, tightening financial conditions, geopolitical conflicts, and the lingering COVID-19 pandemic, leading to a forecast slowdown in global growth[92] - Uncertain economic conditions and complex supply chain challenges may drive businesses to invest in solutions that improve operating margins and provide rapid return on investment, potentially favoring the company's supply chain solutions[92] COMPANY OVERVIEW - American Software, incorporated in Georgia in 1970, operates through three segments: Supply Chain Management (SCM), Information Technology Consulting, and Other, with SCM being its core market[94] - The company delivers digital supply chain optimization via the Logility Digital Supply Chain Platform, leveraging AI and machine learning for integrated business planning, advanced analytics, and network design[95][96] - The Logility platform is highly regarded, named a leader in multiple IDC MarketScape reports and positioned in Gartner's Challenger quadrant for Supply Chain Planning Solutions, serving approximately 860 clients in 80 countries[98][99][100] Recent Accounting Pronouncements - For information regarding recent accounting pronouncements and their impact, refer to Note A in the Notes to Condensed Consolidated Financial Statements[105] COMPARISON OF RESULTS OF OPERATIONS Three-Month Comparison: Revenue and Expense Items as Percentage of Total Revenue and Pct. Change (2022 vs. 2021) | | Three Months Ended October 31, 2022 (Percentage of Revenue) | Three Months Ended October 31, 2021 (Percentage of Revenue) | Pct. Change in Dollars 2022 vs. 2021 | | :------------------------------------ | :---------------------------------------------------------- | :---------------------------------------------------------- | :----------------------------------- | | Revenue: | | | | | Subscription fees | 39 % | 33 % | 19 % | | License | 2 % | 2 % | (15)% |\n| Professional services and other | 31 % | 35 % | (11)% |\n| Maintenance | 28 % | 30 % | (5)% |\n| Total revenue | 100 % | 100 % | 1 % |\n| Cost of revenue: | | | |\n| Subscription fees | 13 % | 11 % | 19 % |\n| License | — % | 1 % | (53)% |\n| Professional services and other | 22 % | 24 % | (8)% |\n| Maintenance | 5 % | 6 % | (10)% |\n| Total cost of revenue | 40 % | 42 % | (2)% |\n| Gross margin | 60 % | 58 % | 3 % |\n| Research and development | 14 % | 14 % | 2 % |\n| Sales and marketing | 18 % | 19 % | (3)% |\n| General and administrative | 19 % | 18 % | 10 % |\n| Total operating expenses | 51 % | 51 % | 3 % |\n| Operating income | 9 % | 7 % | 3 % |\n| Other income: | | | |\n| Other, net | — % | 3 % | nm |\n| Earnings before income taxes | 9 % | 10 % | (28)% |\n| Income tax expense | 2 % | 1 % | 79 % |\n| Net earnings | 7 % | 9 % | (37)% | Six-Month Comparison: Revenue and Expense Items as Percentage of Total Revenue and Pct. Change (2022 vs. 2021) | | Six Months Ended October 31, 2022 (Percentage of Revenue) | Six Months Ended October 31, 2021 (Percentage of Revenue) | Pct. Change in Dollars 2022 vs. 2021 | | :------------------------------------ | :-------------------------------------------------------- | :-------------------------------------------------------- | :----------------------------------- | | Revenue: | | | | | Subscription fees | 39 % | 33 % | 21 % | | License | 2 % | 2 % | (22)% | | Professional services and other | 31 % | 34 % | (3)% | | Maintenance | 28 % | 31 % | (5)% | | Total revenue | 100 % | 100 % | 4 % |\n| Cost of revenue: | | | |\n| Subscription fees | 12 % | 11 % | 16 % |\n| License | — % | 1 % | (49)% |\n| Professional services and other | 23 % | 24 % | (2)% |\n| Maintenance | 5 % | 6 % | (15)% |\n| Total cost of revenue | 40 % | 42 % | — % |\n| Gross margin | 60 % | 58 % | 6 % |\n| Research and development | 14 % | 14 % | 1 % |\n| Sales and marketing | 19 % | 20 % | (3)% |\n| General and administrative | 19 % | 17 % | 18 % |\n| Total operating expenses | 51 % | 51 % | 5 % |\n| Operating income | 9 % | 7 % | 19 % |\n| Other income: | | | |\n| Other, net | — % | 2 % | nm |\n| Earnings before income taxes | 9 % | 9 % | (9)% |\n| Income tax expense (benefit) | 2 % | (1)% | nm |\n| Net earnings | 7 % | 10 % | (33)% | REVENUE - Total revenue increased by 1% for the three months and 4% for the six months ended October 31, 2022, primarily driven by a significant increase in subscription fees[113][114] - International revenue represented approximately 19% and 18% of total revenue for the three and six months ended October 31, 2022, respectively, up from 16% in the prior year[115] Subscription Fees - Subscription fees revenue increased by 19% for the three months and 21% for the six months ended October 31, 2022, primarily due to an increase in contracts, higher cloud services annual contract value, and multi-year contracts[116] Subscription Fees Revenue (in thousands) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | % Change | | :---------------------------- | :---------------------------------- | :---------------------------------- | :------- | | Supply Chain Management | $ 12,326 | $ 10,361 | 19 % | | Total subscription fees revenue | $ 12,326 | $ 10,361 | 19 % | | | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | % Change | | :---------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Supply Chain Management | $ 24,388 | $ 20,149 | 21 % | | Total subscription fees revenue | $ 24,388 | $ 20,149 | 21 % | License Revenue - License fee revenue decreased by 15% for the three months and 22% for the six months ended October 31, 2022, primarily attributable to the SCM segment[118] - The direct sales channel accounted for approximately 100% of license fee revenues for both periods in 2022, compared to 95% and 86% in the comparable periods last year, with direct sales margins increasing[119] License Revenue (in thousands) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | % Change | | :-------------------------- | :---------------------------------- | :---------------------------------- | :------- | | Supply Chain Management | $ 688 | $ 800 | (14)% | | Other | — | 5 | — % | | Total license revenue | $ 688 | $ 805 | (15)%| | | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Supply Chain Management | $ 992 | $ 1,276 | (22)% | | Other | 16 | 21 | (24)% | | Total license revenue | $ 1,008 | $ 1,297 | (22)%| Professional Services and Other Revenue - Professional services and other revenue decreased by 11% for the three months and 3% for the six months ended October 31, 2022, mainly due to lower revenue from the Other and IT Consulting segments[120] - IT Consulting segment revenue decreased by 20% and 11% for the three and six months, respectively, due to demand for project work[121] Professional Services and Other Revenue (in thousands) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | % Change | | :-------------------------------------------------- | :---------------------------------- | :---------------------------------- | :------- | | Supply Chain Management | $ 5,224 | $ 5,263 | (1)% | | IT Consulting | 4,159 | 5,226 | (20)% | | Other | 211 | 290 | (27)% | | Total professional services and other revenue | $ 9,594 | $ 10,779 | (11)%| | | Six Months Ended October 31, 2022 | Six Months Ended October 31, 2021 | % Change | | :-------------------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Supply Chain Management | $ 10,444 | $ 10,099 | 3 % | | IT Consulting | 8,674 | 9,702 | (11)% | | Other | 485 | 507 | (4)% | | Total professional services and other revenue | $ 19,603 | $ 20,308 | (3)% | Maintenance Revenue - Maintenance revenue decreased by 5% for both the three and six months ended October 31, 2022, primarily due to a normal client attrition rate in the SCM segment[123] - The SCM segment accounted for 96% of total maintenance revenue for the three and six months ended October 31, 2022[123] Maintenance Revenue (in thousands) | | Three Months Ended October 31, 2022 | Three Months Ended October 31, 2021 | % Change | | :---------------------------- | :---------------------------------- | :---------------------------------- | :------- | | Supply Chain Management | $ 8,514 | $ 8,956 | (5)% | | Other | 316